Iceland Foods Limited

A frozen food internet retailer called Iceland Foods Limited offers frozen food delivery services. The business also has an eight hundred and eighty-store chain in different British cities and towns. It is recognized as one of the top businesses in the frozen food sector, with up to 2.2% of the food market in the United Kingdom. This is largely attributable to the innovations that have been incorporated into their systems, like the online stores and delivery system that make it simple and convenient for customers throughout the U.K. and other European nations to shop. This aspect also contributed to the organization receiving the accolade of Best Online Supermarket. Following this success, the company seeks to expand operations beyond the current reach. This internationalization of operations presents numerous opportunities for growth and development of the company as well as threats to the daily business operations of the company. Analysis of the present market of the company and the potential markets that the company could venture into sheds light on the various strategic techniques the company could use to expand operations not only within the United Kingdom but also beyond to other European countries.
This research highlights the analysis of the company's present stand in the U.K. market, the opportunities the company has to advance in this market and the opportunities available beyond the present scope of the company's operations. The research also analyses the state of the market that the company intends to venture into and provides key insights on suitable strategies that may prove useful upon entry into the said market.

U.K. Market analysis

To establish the present stand of Iceland Foods Limited, analysis of the present market is required to assess the performance of the company in this market. A STEEPLE analysis as the one employed below shows the various macro-environmental factors that influence the daily operations of the company.

Social factors

Shoppers in the U.K. are moving more towards bulk shopping. Shoppers prefer one time visits to stores as it is convenient. This factor has made numerous supermarkets to include wider varieties of products to accommodate all consumer needs. Customers have also become increasingly aware of healthy foods and the harmful effects of certain processed foods. These factors have led to the introduction of organic foods, non-frozen groceries and even dry cereals to the shelves of numerous Iceland Foods stores across the country. The increase of female workers in the U.K. has also led to a decline in home prepared meals. This has caused a greater shift towards value addition to ease the process of food preparation for customers. Furthermore, the introduction of diverse payment methods such as cash and checks has helped improve customer experience to the advantage of the company's overall outlook (Carter, et al., 2016,p.480).

Technological factors

One of the major causes for the success of Iceland foods limited is the company’s utilization of technological innovations to improve functionality in daily operations(Coronando Mondragon A.E., C.E., C.S., 2015,p.56). The use of internet resources has helped the company become the best online store. Other technological applications such as electronic inventory management, electronic weighing systems and electronic fund transfer enhance the customer experience as well as facilitating the processes of inventory management. These technological applications also help to ease communication between suppliers.

Economic factors

One of the significant factors that influence business operations is the conservative state of the market that a company operates in. The U.K. economy is a robust economy that has brought the company only so far. Unemployment rates keep rising, and this affects the purchasing power of plenty potential customers (Bourlakis and Weghtman, 2004,p.9). This has led the company to introduce policies that allow employment of students and various non-technical staff for lower wages in an attempt to bridge this gap. Furthermore, the concentration of the company on the U.K. food market could prove risky in future, and it is thus imperative that the scope of operations be broadened to cover a wider market(Schmutz, Kneafsey, Kay, Doernberg and Zasada,2017,p.6).

Environmental factors

Over the past, there have been increased calls for the management of stores and supermarkets to take social responsibility towards environmental conservation. Iceland foods limited has responded to the calls with changes in corporate governance and store policy that has seen stores take up active roles in conserving the environment around them (Mena, Terry and Ellram, 2014,p.147). This is reflected in waste disposal and management. Processed foods and other ‘fatty’ foods have also attracted much attention to their harmful effects on human health. This causes strain on the relationship between suppliers and consumers of such products. Iceland foods limited, to mitigate this strain, has introduced organic foods and incorporated value addition techniques in food preparation.

Political factors

The company has, since its inception, enjoyed political stability in the United Kingdom which has enabled the business to run smoothly. The government does, however, impose policies and regulations such as license requirements which affect the company's activities and even social composition. The composition of the workforce in most stores owned and franchised by Iceland foods limited is influenced by government employment requirements especially in stores outside the U.K. the government also controls taxes imposed on imported food products which consequently affects the cost of production and the revenue from the sale of these products. Until Britain's exit from the European Union, the company enjoyed the many political advantages the union brought that made business across borders in Europe convenient. Such benefits include the trade agreements between the member states and lenient border restrictions for citizens of these countries.

Legal factors

The Food Retailing Commission is a government body that oversees the regulation of activities surrounding retailing of food. This body has enacted laws and guidelines against activities such as sporadic price alterations and resolving disputes and conflicts between suppliers and retailers. The government also checks against monopolization of markets and monitors licenses of businesses within the country. This case is similar to stores outside the U.K. that are subject to the governments of the resident jurisdictions. These legislative policies are in place to ensure fair competition and advocate for fair prices on behalf of consumers. The business operations of Iceland foods limited are always influenced by these legislations as the business has to meet the specific benchmarks for quality, safety and fair play in the market.

Ethical factors

Food is a very essential and sensitive part of any living creature, human or otherwise. As important as the provision of food is a guarantee of safety after eating the food. Standards for handling food exist to ensure that food products that leave store shelves across the country are safe and fit for human consumption. This is the task that every food retail store like Iceland foods limited has to accomplish by ensuring that the food products have not stayed on shelves past their expiry dates and that handling standard is adhered to. The survival of a food retailing company solely depends on the assurance of safety of the food products (Jones, Conklin, Suhrcke andMonsivais,2014,p.218) and the case is similar for Iceland foods limited. These standards influence activities of packaging, transport, storage and handling of food products.
Market analysis also requires that a market’s attractiveness to prospective business be assessed to ensure that the market is lucrative as this ensures the business profits from the investment into the market. Using Porter’s five forces, the attractiveness of the U.K. food market is ascertained to shed more light on possible ventures and pivotal points to expanding the company’s location locally.

Porter’s five forces

Threat of new entrants

The business of frozen foods is presently dominated by huge supermarkets and chain stores. This means that entry would require intensive financial investment to survive in the market. Suppliers in the market also prefer large-scale retailers who purchase large consignments of frozen food products. These economies of scale further discourage small-scale business owners from venturing into frozen food. Most of the businesses in this market have invested heavily in supply and marketing, and for a new entrant company to beat this competition and survive in the business, they would need to invest more than the competition. This discourages new small-scale businesses from venturing into the market.

Threat of substitution

Consumers may prefer fresh produce to frozen foods. This may consequently lead consumers to change their source of food products to grocery stores that provide fresh produce. This can, however, be countered by acquiring small fresh produce and grocery stores thus providing customers with whatever product they may prefer. With the move towards bulk shopping, this becomes convenient for customers and thus improving customer experience. The increase in popularity of home cooked meals and their introduction in various restaurant menus could also provide a suitable substitute for frozen food which could then harm business operations of Iceland Foods Limited.

Suppliers’ bargaining power

Due to its size, Iceland foods limited obtains supplies for their products at a large scale. This allows them to bargain for promotional prices and discounts from suppliers. To ensure fair play, however, suppliers sell their products at higher prices than the cost of production to prevent their business from slipping to loss. Iceland foods limited is also able to source suppliers from all over the world allowing the company to bargain for better prices that influence the business of the company towards bigger profit margins.

Consumer bargaining power

This factor influences the profit margin of every business transaction. Through consultation with the company or intervention by the government, customers can get lower prices for commodities, and this affects the business. Awareness of free trade practices has ensured that over time customers retain bargaining power even with changes in prices of supplies. The U.K. food market, not unlike any other market, is influenced greatly by consumers (Roheim, Gardiner and Asche, 2007,p.247). The increased popularity of bulk shopping has caused diversification of Iceland food stores towards providing a wide variety of vegetables and dry cereals. Awareness of western economies' influence on Third World countries' food production also influences the availability of commodities such as tea, coffee and cocoa.

Competition

Large-scale companies such as Iceland foods limited can source supplies at cheaper rates which increases their profit margin. This discourages small-scale businesses in the same market and even forces the exit of such companies(Bronnman and Asche, 2016,p.237). Furthermore, such companies can influence expenditures in marketing and incorporate the useful aspects of modern technology into daily business operations (Porter and Heppelman, 2013,p.71). This is enabled by the company's access to vast resources. This influences customer experience as well as attract potential customers to the market. This makes the food market in the United Kingdom a very lucrative business for large-scale companies with access to sufficient resources.
As part of the plan to expand operations of the company go beyond the current scope of operations, this research also provides strategic information on a suitable country that presents a suitable market environment for such expansion. Germany, being one of the leading economies in the world regarding consumer buying power and suitable political environment. A STEEPLE analysis and Porter's five forces analysis shed more light on the environment of the German food market and its suitability as a potential venture for Iceland Foods Limited.

STEEPLE Analysis

Social factors

There is increased internet use among Germans as is the situation globally. Iceland foods, being an online food retail store, will benefit much from this development as the company will obtain the audience of a large part of the population. In the words of BITKOM C.E.O. Bernhard Rohleder, “…consumer reception for online frozen food is good.” This shows that the German food market is quite attractive and lucrative as well.

Technological factors

Germany is a developed country with numerous technological resources. High internet speeds will help avail product listings to consumers and aid in the process of communication between consumers and the company as well as with the suppliers. Infrastructural developments in the country assist in the processes of transport and delivery of the company’s products to consumers. Access to machinery from within the country also helps in automation and mass production of commodities which enhances business operations of the company.

Economic factors

Despite its economic strength, Germany has a very high number of unemployed people. This unemployment affects the business operations of the company in some ways. First, it reduces the purchasing power of consumers which has an impact on the profit from the sale of commodities. Secondly, the high rate of unemployment causes legislation by the government forcing the company to include residents as the larger part of the workforce. It also provides an avenue for obtaining non-technical labour force at lower rates thus increasing profit margins for the company.

Environmental factors

In Germany, as it is across the globe, people are becoming increasingly concerned about their health. This concern is mainly against processed foods and other harmful food products. This will cause need to incorporate modern health standards in food production and to provide healthy alternatives for certain food products to accommodate people with different needs. Furthermore, German authorities also call for stores and corporations to take the initiative of conserving the environment which will be evident in store policy concerning waste management (Nestle, 2013,p.59).

Political factors

Germany has a very stable political environment with very few political conflicts that could affect business adversely. Fair tax regulations and few border restrictions are bound to do business in Germany to flourish.

Legal factors

The German government has laws and regulations against monopoly control and unfair competition that provide potential legal shields for the company upon entry. Lenient tax regulations also favour business operations and will be beneficial for Iceland foods limited upon entry to this market.

Ethical factors

Issues of fair trade arise when a big company such as Iceland foods limited enters into a new market and displaces small-scale competition. The increased popularity of healthy eating and non-processed food commodities affect the ethical environment that the company operates in upon entry to the German food market.

Porter’s five forces analysis

An analysis of the German market against these five forces that influence the attractiveness of a market sheds much light on the viability of the move to expand to the German food market. The bargaining power of consumers is one such force. This is influenced by increased awareness of fair trade policies by the German populace that enhances this bargaining power as well as establishing clear scopes for price ranges of commodities. The bargaining power of the suppliers, on the other hand, is increased by the fact that Iceland foods will be a new entrant to the German food industry and will thus require new suppliers from within the country and beyond. The company also presents a new threat to existing competition within the market. The company can take a substantial portion of the market due to their ability to invest largely in supply and marketing. However, there exists a well-established competitive force within this market that comprises of various frozen food and grocery stores and supermarkets. It thus calls for intensive investment on large scale supply and value addition to survive in the German food market upon entry.
Following the above analyses, it is important for Iceland foods limited to enter into the market of frozen foods in Germany at a large scale. This will ensure that the company maintains a grip on the German food market. Furthermore, the country provides a suitable political and legislative environment that requires the company to take maximum advantage of to flourish. Large-scale operations enable the company to obtain better rates for supplies that in turn translates to bigger profit margins. Furthermore, it allows the company to adjust prices of commodities below those of the competition. The German population also provides a huge and vibrant market for Iceland Foods Limited’s products making the market a very lucrative venture. Free trade policies and regulations against unfair competition also offer legal cover for the company from competing companies in the market upon entry. This allows the company to conduct business operations unhindered thus enhancing the scope of operations of Iceland foods Limited.

Entry strategy (Recommendations)

The German food market is primed for the entrance of Iceland Foods Limited. To accomplish successful entry, the focus must first shift from pricing to quality management and improvement, as German consumers are more concerned with quality not price. Intensification of innovation in internet solutions is necessary, as this is one of the key pillars upon which all business of Iceland Foods Limited operates; the other being freezing food for longevity and preservation. It is also important that, upon entry, the company diversify products and services to fit the particular needs of people from different locales. This ensures that the company commands a high market share in future and influence consumers countrywide in their favour.

Conclusion

Analysis indicates that the present market environment in the U.K. has numerous advantageous features that have helped the development of Iceland Foods Limited to becoming one of the best stores globally. The market does have features that pose a threat to this growth in daily business, and the research highlights the various techniques the company has employed to overcome these factors. The past success of the company has prompted the company to expand the scope of operations in Germany as a potential candidate state for this expansion. Germany has a good market for frozen food due to their stable economy, the high purchasing power of the population and a suitable political environment. The country also provides suitable business conditions due to lenient border restrictions, government protection from exploitation and unfair competition as well as the availability of high-level technology in machinery and production automation. These factors make Germany a suitable potential market for Iceland foods limited. Economies of scale are likely to favour the entry of a big company as Iceland foods, and it is thus imperative that large-scale entry strategy be implemented with emphasis on quality of products and intense investment in marketing and supply management.

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